Posted: March 1, 2015 |  AUTHOR: KEN FOX | CONTACT ME

 

Privately owned Xiaomi (pronounced Shiao-Me) was founded in April 2010 by serial entrepreneur Lei Jin, who believes high-quality technology does not have to cost a fortune. The Beijing based company developed and initially sold mobile phonesdirectly to consumers through e-commerce sites in China.

handThe company’s success stems from creating sleek, inexpensive hi-tech smartphones sold through its website and Chinese ecommerce sites: Weibo, Wechat, Baidu, QQ and others. Their flagship smartphone Mi boasts an expanded product line, including models: Mi 4, Mi 3, Mi Pad, Mi Box, Mi TV, Redmi 1S, Redmi Note, Mi Power and related accessories.

  

Xiaomi Mi Note

The growth and expansion plans for the company are impressive:

1.  It became China’s top smartphone brand by the end of 2014 (Xiaomi market share 12.5%) edging ahead of Samsung (market shares 12.1%)..

2. It sold 61 million smartphones in 2014, with a goal of selling 100 million by the end of 2015.

3. The company has expanded distribution to Taiwan, Hong Kong, Singapore, Malaysia, Philippines, India and Indonesia. 

4. It plans a soft 2015 launch in the U.S. of its accessories such as: Mi Band fitness trackers, earphones and the like. There are hardware certification, software testing and logistical concerns which need to be resolved before a more formal U.S. launch can take place.

5. The company plans to enter Brazil, helped by their Brazilian born VP, Hugo Barra (previously Google VP for Android).

   

Gold Xiaomi Piston Earphone w/Remote & MIC for Smartphone

Gold Xiaomi Piston Earphone w/Remote & MIC for Smartphone

Xiaomi entered India in July 2014 with Flipkart distributing its phones via Bharti Airtel retail stores. A patent challenge by Ericsson and a subsequent Delhi High Court ruling, had  temporarily barred Xiaomi from selling its products in India, which has been subsequently lifted.

Xiaomi filed 2,318 patents in 2014, 1,380 in China and additional 665 international patents. Xiaomi launched its Mi Note phone in January 2015, claiming it is shorter, thinner and lighter than the iPhone 6 Plus. The 16 gigabyte phone is priced at $371, cheaper than Apple’s phone and Samsung’s phablet* Galaxy Note 4.

Xiaomi has been called “the most valuable tech start-up.” It raised $1.1 billion in its latest, December 2014 round of funding, giving it a 2014 valuation of $45 billion. Key investors in the company include: All-Stars Investment, DST Global, Hopu Investment Management, Yunfeng Capital and Singapore’s sovereign wealth fund GIC.

Mr. Lei, its founder, says he will focus development in three device areas: smartphones, televisions and routers. Xiaomi announced in November 2014 it will invest $1 billion in video content as it develops televisions sets. It already purchased a $200 million stake in Chinese appliance maker Midea in December 2014. Additionally, Xiaomi purchased a 3% share of Beijing based software firm Kingsoft Corporation Ltd. from Tencent

Xiaomi Mi TVs

Xiaomi Mi TVs

Holdings for about $68 million. Xiaomi CEO Lei Jun is also a founder and now chairman of Kingsoft, which makes entertainment, internet security and office software. The deal increases Lei’s voting rights in Kingsoft to 29.9%. Xiaomi spokesman Hugo Barra, VP of its Global Division, said the company will continue to invest in media and content, including trying to acquire more assets from overseas.

Xiaomi also credits part of its success on consumer input received from its user interface, MIUI,** which is updated weekly. The company’s on line forum has about 10 million registered users, with 50 employees working full time fielding customer questions on social media alone.

Xiaomi Android Powered 47 inch 3D Smart TV, available in 6 colors; Price: $490

tvThere are also rumors Xiaomi will build an electric car, either on its own or more likely via partnering with a U.S. company.

Commentary

Xiaomi has created strong loyalty among young Chinese fans. This reflects the company’s keen  knowledge of the market and continued dialogue with their user base. It has developed almost a cult following. Young Chinese fans are turned away when Xiaomi’s president and chairman Lei Jin holds an overcrowded press conference announcing new product launches. The company has hired key executives from hi tech companies like Google and Microsoft to help guide and differentiate their product offerings.

The company’s vision to not depend only on smartphones will help facilitate their global push. Xiaomi has taken on Apple an Samsung in China and succeeded by offering their high end, sexy looking products at low prices. Their success has not been tied to service plans from telephone-providers which will be a challenge when and if they launch smartphones in the U.S. However, there are multiple U.S. entry options, including:

1. Xiaomi may partner with another company, offering free or very inexpensive phones for a committed service plan.

2.  They may strike a deal with a retailer to offer exclusive distribution with a new service plan model (possibly representing a paradigm shift).

3. They may acquire an electronics company with existing retail stores and established distribution channels, like what Acer did with Gateway.

In any case, we are likely to see more of Xiaomi around the world and eventually in North America. Chinese global brands are increasingly making a global impact, such as Lenovo, Haier and Alibaba. Xiaomi may not be the easiest brand name to pronounce but their flag will likely be planted in the U.S. sometime in the near future.

_______________________________________________________________________

*A “phablet” is defined as a mobile device that has features of both a smartphone and a tablet computer, but are too big or too small in size to be classified as either one.

**MIUI, pronounced MeYou, is a user interface developed by Xiaomi and based on software Android operating system.

Resources:

1. Xiaomi Faces a Major Test, Wall Street Journal, December 30, 2014

2. Xiaomi Starts Selling Phones at Artel Stores (India), Wall Street Journal January 5, 2015

3. Xiaomi Aims to Export it Success, The Asian Wall Street Journal, January 19, 2015

4. Xiaomi Creates Online Stir about Brazil Launch, www.zdnet.com, February 13, 2015

5. China’s Xiaomi Unveils Two Thinner. Lighter Phablets, TECHINASIA, January 15, 2015

6. China’s Xiaomi Becomes Most Valuable Tech Start-UP, BBC News, December 29, 2014

7. Xiaomi to Take Tentative First Steps into U.S., but Not Selling Phones, TECHINASIA, February 13, 2015

8. China’s Xiaomi to Buy Stake in Software Firm Kingsoft from Tencent, news.yahoo.com, January 18, 2015

9. Xiaomi Becomes China’s Top Smartphone Brand for first Time in 2014, whips Samsung, TECHINASIA, February 17, 2015

10. Aside from Patents, There’s a Big Reason Xiaomi isn’t Selling its Phones in the U.S. Yet, TECHINASIA, February 16, 2015

11. Xiaomi Website

12. TNW (China) Blog, September 6, 2013

13. Xiaomi’s Rumored Electric Car Could Become a Reality, TECHINASIA, December 4, 2014

SUBSCRIBE to our Newsletter   

 

©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

Comment